Forex - Japanese yen trends weaker ahead of September retail sales data

Investing.com - The Japanese yen weakened slightly in early Asia on Tuesday ahead of retail sales data from Tokyo.

USD/JPY traded at 107.84, up 0.03%, while AUD/USD changed hands at 0.8800, down 0.03%. EUR/USD traded at 1.2698, down 0.02%.

Japan's September preliminary retail sales data are due at 0850 Tokyo time (2350 GMT). The forecast for retail sales is for a 0.6% gain on year, a third straight year-on-year rise but slower than a 1.2% increase in August.

Overnight, the dollar traded lower against most major currencies after U.S. pending home sales disappointed investors, while fresh Ebola fears weighed on the greenback as well.

The National Association of Realtors reported earlier its pending home sales index rose by 0.3% last month, disappointing expectations for a 0.5% gain. Pending home sales in August fell by 1%.

Year-on-year, pending home sales rose 1.0% in September, missing expectations for a 2.2% reading following a 4.1% decline in August.

Moderating price growth and sustained inventory levels are keeping conditions favorable for buyers.

“Housing supply for existing homes was up in September 6% from a year ago, which is preventing prices from rising at the accelerated clip seen earlier this year,” said Lawrence Yun, the association's chief economist.

The numbers weakened the dollar by clouding expectations as to when the Federal Reserve may hike benchmark interest rates.

While the U.S. central bank is seen closing its monthly bond-buying stimulus program likely at a policy meeting ending Wednesday, spotty U.S. data have made it unclear when rate hikes might begin in 2015.

On Friday, the Census Bureau reported that U.S. new home sales rose 0.2% in September to 467,000 units, missing expectations for an increase to 470,000 units.

The August figure was downwardly revised to a 15.3% climb to 466,000 units from a previously estimated 18.0% jump to 504,000 units.

Still, the dollar didn't plunge, as a longer-range view of economic indicators still points to a sustained U.S. recovery, including in the housing sector.

Earlier last week, the National Association of Realtors reported that U.S. existing home sales increased 2.4% to a 5.17 million units last month from 5.05 million in August. Analysts had expected existing home sales to rise 1% to 5.10 million units in September.

Ebola fears pressured the greenback lower as well.

The state of New Jersey forced a quarantine on a nurse working with Doctors Without Borders who recently returned to the U.S., and while she was later released, concerns of civil rights issues surrounding the case unnerved markets.

Also, a five-year-old boy in New York City recently in from the West African nation of Guinea was reportedly undergoing testing for the deadly virus.

Meanwhile in Europe, the single currency saw support after results of stress tests on Europe’s largest banks revealed that most of the region’s top lenders have enough capital to survive another financial crisis.

The European Central Bank announced the results of yearlong tests to assess the finances of 150 banks on Sunday.

A total of 25 banks were found to have capital shortfalls, but most have already taken steps to resolve these issues, the ECB said.

Elsewhere in Europe, German research institute Ifo reported earlier that its business climate index slid to 103.2 in October from 104.7 in September.

This month's reading was the lowest level since December 2012 and missed forecasts for a 104.3 reading, which capped the euro's gains in earlier trading though Fed uncertainty brought the single currency back higher in the afternoon.

German firms reported that they are gloomier about current conditions and future prospects than last month, fueling fears for a disappointing fourth-quarter growth rate.

Germany's economy grew by 0.7% in the first quarter of the year, but then contracted by 0.2% in the three months to June. The country is to release data on third quarter growth next month.

The US dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, rose 0.01% at 85.63.

On Tuesday, the U.S. is to release data on durable goods orders and a report by the Conference Board on consumer confidence.